Mahindra Holidays to tap Indian diaspora3 min read . Updated: 30 Jul 2013, 12:07 AM IST
Mahindra Holidays has 43 properties in India and abroad, adding up to 2,399 units and plans to add 1,000 units in next two years
Mumbai: Mahindra Holidays and Resorts India Ltd (MHRIL), India’s largest seller of timeshare vacation rooms, is planning to expand its business by tapping the Indian diaspora in countries such as the UAE and the UK and in Africa, according to company officials.
“Sri Lanka is a clear candidate. And as market evolves, we would evaluate having a bigger presence in Malaysia and rest of Thailand… and if we find tens and thousands of people going to Europe, we will certainly evaluate it," chairman Arun Nanda said in an interview.
As far as India is concerned, the “entire East is an opportunity and that is the first thing we are looking at, and the hill stations in Bengal are another opportunity," said Nanda.
Mahindra Holidays, a part of the Mahindra group, has 43 properties across India and abroad, adding up to 2,399 units. Nanda plans to add an additional 1,000 units in the next two years.
“A unit in our case is a mix of a one-bedroom, a two-bedroom and a studio," he said.
The rupee’s depreciation is only helping its cause, according to Rajiv Sawhney, managing director and chief executive officer of Mahindra Holidays.
Analysts said Mahindra Holidays’ unique model does put it in a sweet spot, with the company using upfront membership fees to build resorts, but cautions that dissatisfaction could rise as membership increases.
According to a 9 July report by Edelweiss Securities Ltd, the slow pace in inventory addition and customer dissatisfaction led to a drop in membership addition and increased cancellations. Member addition fell from 20,420 in fiscal 2008 to 17,489 in fiscal 2013.
“We are fully prepared this time around and are therefore aggressively increasing our inventory preemptively," Sawhney said.
Such companies need to ensure that they build trust, said P.R. Srinivas, senior adviser, Crowe Horwath HTL Consultants.
“In the past, Indian timeshare companies failed to deliver on their promises. Worldwide also, many timeshare companies went bust. There is a historical context for these timeshare companies hitting highs and lows," he said.
To be sure, timeshare companies don’t have a very good track record with firms such as Dalmia Resorts International Pvt. Ltd having gone bust while others such as Sterling Holiday Resorts India Ltd having gone through difficult times and seeking to make a comeback.
Mahindra Holidays has more than 160,000 members and was started with an initial investment of ₹ 18 crore in 1996, a late entrant in the timeshare space in which Dalmia Resorts and Sterling Holiday were already present.
Sterling Holiday also faced client dissatisfaction for not meeting expectations after promising much with an initial burst of explosive growth soon after its 1986 launch. The company started turning around after private equity firm Bay Capital Partners Ltd invested $13.8 million in 2009 and R. Subramanian, Sterling’s chairman and managing director, ceded control.
“Trust does matter," said Ramesh Ramanathan, Sterling’s current managing director.
“People must believe you. They should be convinced that the company would be around for 25 years to offer their promised holidays," he added.
Ramanathan had earlier been managing director at Mahindra Holidays. He declined to comment on the prospects of Mahindra Holidays.
Srinivas, cited above, added that both operators and customers are maturing irrespective of structural and legal challenges remaining for timeshare as a product. “Mahindra’s name is also bringing credibility factor. Indian timeshare market is in the evolving stage," he said.
Gokul Raj, executive director, HBJ Capital Securities Pvt Ltd, said, “The real challenge still remains customer satisfaction and retention. For someone who is a frequent traveller, the return on equity is less and the company benefits more. What they (the companies) need to do is increase resort spending by members by providing better facilities within them."
Naimish Dave, a director with Avalon Consulting, said the hospitality industry is cyclic.
“They can only build capacity in chunks and there will again be a time when they will have more members and less inventory."